India offers a huge growth potential in the infrastructure space. The rise in roads, rails, bridges, commercialisation etc. has very much increased the demand for land in India. The high demand has surely pushed the price of land higher over the years and is now well out of reach of individuals who are looking for an economical real estate property that can suit their budget. NRIs have to carefully sort out their investment options and try to avoid pitfalls.
Under RBI’s guidelines, a non-resident Indian is allowed to purchase certain types of properties, while other forms may require special permissions.
The RBI’s regulations are fairly easy as well and you do not have to take any prior permission from the authorities.
The rules for any such property transaction falls under the Foreign Exchange Management Act (FEMA).
The Foreign Exchange Management Act, 1999 (FEMA) empowers the reserve bank to frame regulations to prohibit, restrict or regulate the acquisition or transfer of immovable property in India by certain persons residing outside India.
NRIs can acquire by way of purchasing any immovable property (other than agricultural land/plantation property/farm house) in India. Also, NRIs may transfer any immovable property in India to a person resident in India.
NRIs can make payment for the acquisition of immovable property (other than agricultural land/plantation property/farm house) out of funds received in India through normal banking channels. NRI who has purchased residential/commercial property under general permission is not required to file any documents with the Reserve Bank.
An NRI can purchase the property, either as a single owner or jointly with any other NRI. They must be a resident of India, otherwise, he or she is not allowed to invest in a property in India, irrespective of second holder’s contribution.
A PIO can acquire any immovable property by way of purchase. Maybe by way of gift from NRI or by inheritance from a person resident in India or a resident outside India who had acquired such property in accordance with the provision of foreign exchange law in force or FEMA regulations, at the time of acquisition of the property.
An NRI can continue to hold residential and commercial properties in India. NRIs can also lease them and repatriate the rental income received after paying the due taxes if any. A tenant who pays rent to an NRI owner must remember to deduct TDS at 30%. The income can be received to an account in India or the NRI’s account in the country he is currently residing.
When an NRI sells a property the buyer is liable to deduct TDS @ 20%. In case the property has been sold before 3 years from the date of purchase a TDS of 30% shall be applicable. NRIs are allowed to claim exemptions under Section 54 and Section 54EC on long term capital gains from a sale of house property in India. Limits and conditions for repatriation are different based on the funds used for buying property.